Mrs Greg is finance officer doing bond and stock analysis Company A is planning to issue an eight year maturity $10,000,000 bond with a 12 percent annual coupon rate and paid semi annually Suppose that a similar and comparable (all else equal) it's competitor, namely Company B has $ 100,000,000 eight year maturity bond with 14 percent annual coupon rate, also paid semi annually What is a reasonable estimate the Company A could expect from the proceeds of issuing its bonds What happens if Company A only wants to sell its bond for $ 9,500,000 or above Explain They also analyse the firm's equity According to the recent Holding Meeting, at the beginning of this year, the firm is expected to pay a cash dividend of $0 8 per share at the end of this year They consider that the firm will attain a sustainable growth rate of 3 percent per annum forever They consider that a 10 percent is an appropriate equity discount rate 3 Estimate the firm's equity value per share now (at the beginning of this year) 4 Due to the pandemic uncertainties, explain what are reasonable points that they to adjust their equity valuations in part c)

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Posted on Jun 28, 2024

Mrs. Greg is finance officer doing bond and stock analysis. Company A is planning to issue an eight-year maturity $10,000,000 bond with a 12 percent

Mrs. Greg is finance officer doing bond and stock analysis. Company A is planning to issue an eight-year maturity $10,000,000 bond with a 12 percent annual coupon rate and paid semi-annually. Suppose that a similar and comparable (all-else equal) it's competitor, namely Company B has $ 100,000,000 eight-year maturity bond with 14 percent annual coupon rate, also paid semi-annually.

What is a reasonable estimate the Company A could expect from the proceeds of issuing its bonds?
What happens if Company A only wants to sell its bond for $ 9,500,000 or above? Explain!

They also analyse the firm's equity. According to the recent Holding Meeting, at the beginning of this year, the firm is expected to pay a cash dividend of $0.8 per share at the end of this year. They consider that the firm will attain a sustainable growth rate of 3 percent per annum forever. They consider that a 10 percent is an appropriate equity discount rate.

3. Estimate the firm's equity value per share now (at the beginning of this year)!

4. Due to the pandemic uncertainties, explain what are reasonable points that they to adjust their equity valuations in part c)?